nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2011‒04‒02
nineteen papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. The Transatlantic Productivity Gap: Is R&D the Main Culprit? By Ortega-Argilés, Raquel; Piva, Mariacristina; Vivarelli, Marco
  2. Price Setting and Price Adjustment in Some European Union Countries: Introduction to the Special Issue By Daniel Levy; Frank Smets
  3. The economics of multilingualism in the EU By Jan Fidrmuc
  4. Citizenship without Respect: The EU's Troubled Equality Ideal By Dimitry Kochenov
  5. Travel and activity time allocation: An empirical comparison between eight cities in Europe By Charles Raux; Tai-Yu Ma; Iragaël Joly; Vincent Kaufmann; Eric Cornelis; Nicolas Ovtracht
  6. The REMEDE Project: A useful framework for assessing non-market damages from oil spills? By Feyes, Jonas; Cole, Scott; Hasselström, Linus
  7. Large firm dynamics on the Nordic-Baltic scene Implications for innovation and growth By Braunerhjelm, Pontus; Halldin, Torbjörn; Pedersen, Torben; Pajarinen, Mika; Ylä-Anttila, Pekka; Heum, Per; Kalvet, Tarmo
  8. Occupational Mobility of Immigrants in a Low Skilled Economy: The Spanish Case By Simón, Hipólito; Ramos, Raul; Sanromá, Esteban
  9. Phased in nuclear power and electricity prices: the case of Italy By Eric Guerci; Fulvio Fontini
  10. Size Value and Asset Quality Premium in European Banking Stocks By Nawazish Mirza; Herve Alexandre
  11. The Relative Efficiency of Active Labour Market Policies: Evidence From a Social Experiment and Non-Parametric Methods By Vikström, Johan; Rosholm, Michael; Svarer, Michael
  12. The Impact of Legislation on Credit Risk - Comparative Evidence From the United States, the United Kingdom and Germany By Christian Schmieder; Philipp Schmieder
  13. Intangibles and the gender wage gap: An analysis of gender wage gaps across occupations in the Finnish private sector By Rita Asplund; Sami Napari
  14. Is Early Retirement Encouraged by the Employer? Labor-Demand Effects of Age-Related Collective Fees By Hallberg, Daniel
  15. Does the Support of Innovative Clusters Sustainably Foster R&D Activity? Evidence from the German BioRegio and BioProfile Contests By D. Engel; T. Mitze; R. Patuelli; J. Reinkowski
  16. Type, number, and incidence. Recent patterns and differentials in relationship careers in Norway By Kenneth Aarskaug Wiik and Lars Dommermuth
  18. Time is money: Could deferred graduate retirement finance higher education? By Bilal Barakat
  19. Discrimination makes me Sick! Establishing a relationship between discrimination and health By Grace Lordan; David Johnston

  1. By: Ortega-Argilés, Raquel (European Commission); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: The literature has pointed to different causes to explain the productivity gap between Europe and United States in the last decades. This paper tests the hypothesis that the lower European productivity performance in comparison with the US can be explained not only by a lower level of corporate R&D investment, but also by a lower capacity to translate R&D investment into productivity gains. The proposed microeconometric estimates are based on a unique longitudinal database covering the period 1990-2008 and comprising 1,809 US and European companies for a total of 16,079 observations. Consistent with previous literature, we find robust evidence of a significant impact of R&D on productivity; however – using different estimation techniques – the R&D coefficients for the US firms always turn out to be significantly higher. To see to what extent these transatlantic differences may be related to the different sectoral structures in the US and the EU, we differentiated the analysis by sectors. The result is that both in manufacturing, services and high-tech sectors US firms are more efficient in translating their R&D investments into productivity increases.
    Keywords: R&D, productivity, embodied technological change, US, EU
    JEL: O33
    Date: 2011–03
  2. By: Daniel Levy (Department of Economics, Bar Ilan University and RCEA); Frank Smets (European Central Bank and CEPR)
    Abstract: This introductory essay briefly summarizes the eleven empirical studies of price setting and price adjustment that are included in this special issue. The studies, which use data from several European countries, were conducted as part of the European Central Bank’s Inflation Persistence Network.
    Keywords: Price Rigidity, Price Flexibility, Cost of Price Adjustment, Menu Cost, Managerial and Customer Cost of Price Adjustment, Pricing, Price System, Price Setting, New Keynesian Economics, Store-Level Data, Micro-Level Data, Product-Level Data
    JEL: D21 D40 E12 E31 E50 E52 E58 L11 L16 M20 M30
    Date: 2010–12
  3. By: Jan Fidrmuc
    Date: 2011–03
  4. By: Dimitry Kochenov
    Abstract: Abstract: The European Union suffers from an empty formalistic reading of the principle of equality when dealing with situations where different legal orders legitimately compete, aspiring to regulate the condition of the same persons in the same circumstances. Consequently, equality before the law is not safeguarded in the Union, and a radical reform of the procedural reading of the principle of equality is required. Most importantly, to live up to being a true principle of EU law, equality in the EU needs to acquire a substantive component which is entirely missing at the moment. This paper looks at the procedural vistas informing the ECJ‘s attempts to address the EU‘s fundamental problems through the redefinition of the scope ratione materiae of EU law following the introduction of Union citizenship, only to find the outcomes of such efforts inadequate and potentially dangerous for the rule of law in Europe. It is suggested that a substantive approach to equality could be employed instead, and that the idea of respect, lying just as equality itself, at the core of the notion of citizenship †and the law as such †could supply the missing core of the equality principle, providing the much-needed cure for some crucial deficiencies of EU law as it currently stands.
    Keywords: law; citizenship; federalism; nationality; sovereignty; competences; European citizenship; European law; German Constitutional Court; non-discrimination; reverse discrimination; European Court of Justice
    Date: 2011–03–23
  5. By: Charles Raux (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat); Tai-Yu Ma (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat); Iragaël Joly (GAEL - Economie Appliquée de Grenoble - INRA : UR1215 - Université Pierre Mendès-France - Grenoble II); Vincent Kaufmann (LaSUR - Laboratoire de sociologie urbaine - École Polytechnique Fédérale de Lausanne); Eric Cornelis (Groupe de recherche sur les transports - Facultés Universitaires Notre-Dame de la Paix); Nicolas Ovtracht (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: A study of daily time allocation to travel and out-of-home activity is conducted across eight European cities over three countries: France (Lyon, Grenoble, Strasbourg and Rennes), Switzerland (Geneva, Bern and Zurich) and Belgium (Brussels), based on individual travel survey data collected between 1997 and 2006. The effects of socio-demographic, spatial context, transport availability and city-specific variables are investigated thanks to the Cox proportional hazard model. The results indicate that socio-demographic characteristics and city (or country) specific effect play a major role while residential density and proximity to high level road or public transport networks have a very limited impact on time budgets for travel and out-of-home activities.
    Keywords: Travel ; Activity ; Time allocation ; Cities ; Europe ; Duration model
    Date: 2011
  6. By: Feyes, Jonas (Swedish Environmental Research Inst.); Cole, Scott (CERE, Centre for Environmental and Resource Economics); Hasselström, Linus (Enveco Environmental Economics Consultancy Ltd.)
    Abstract: As vessel traffic in the Baltic increases, in particular oil transports from Russia to the international market, so too does the risk of oil spills which above the environmental impacts impose costs on society including direct costs, market costs and non-market costs (e.g., losses in welfare from a damaged environment not easily valued in a market). While financial compensation addresses direct and market costs, environmental compensation (compensatory restoration) offsets welfare declines from the loss of resources or the services they provide. Although a clear international system for recovering environmental restoration costs from oil spills is still un-established, the EU's Environmental Liability Directive (ELD) from 2007 introduces a number of useful terms and concepts that may be applicable in the Baltic context. The European Commission (EC) funded development of the REMEDE Toolkit to help Member States carry out the ELD requirements. The Toolkit provides a useful framework for assessing non-market costs associated with oil spill damages by defining the types of ecological losses suffered by the public and providing interdisciplinary methods for scaling resource-based compensation projects whose cost should be incurred by the responsible polluter(s). This paper suggests that the ELD concepts and REMEDE methods could be transferred to the Baltic to help authorities recover environmental restoration costs from responsible polluters. We illustrate application of REMEDE-like concepts and methods to oil spill damages in the context of US regulations and the UN Compensation Commission and discuss the legal acceptance of these methods. The fact that the ELD cannot legally be invoked to address an oil spill in Europe should not preclude a discussion about how these relatively new European legal concepts, including the REMEDE methodology, could be used to establish a more consistent, transparent, and replicable framework for damage assessment in the sensitive marine environment of the Baltic Sea.
    Keywords: Equivalency Analysis; Baltic Sea; environmental valuation; Environmental Liability Directive; environmental compensation
    JEL: Q38 Q51 Q53 Q57
    Date: 2011–03–25
  7. By: Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Halldin, Torbjörn (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Pedersen, Torben (Copenhagen Business School); Pajarinen, Mika (The Research Institute of the Finnish Economy); Ylä-Anttila, Pekka (The Research Institute of the Finnish Economy); Heum, Per (Institute for Research in Economics and Business Administration (SNF)); Kalvet, Tarmo (Tallinn University of Technology)
    Abstract: This paper investigates the role of the 30 largest firms in the respective Nordic country and in Estonia over the last decade and for some variables between 1975 to 2006. The analysis confirms that the largest firms play a critically important role for industrial dynamics in the Nordic countries. Statistics are presented with regard to e.g. ownership, the distribution of employment between home country and foreign units, internationalization, R&D, the share of overall employment and value-added, and the dynamics over time. Both firms in the manufacturing and the service sectors are included. Even though large firms differ in terms of size and industry distribution, they do still play a dominant in all Nordic countries, albeit somewhat diminished over the investigated time period. From a policy point of view it seems of vital concern for the Nordic countries to retain their increasingly foot-loose and globally oriented large firms.
    Keywords: Large firms; internationalization and industrial dynamics
    JEL: F23 L20 O30
    Date: 2011–01–01
  8. By: Simón, Hipólito (Universidad de Alicante); Ramos, Raul (University of Barcelona); Sanromá, Esteban (University of Barcelona)
    Abstract: We analyze the occupational mobility of immigrants between their origin countries and Spain and its determinants. We use microdata from the Encuesta Nacional de Inmigrantes to compute an internationally harmonized occupational status index (ISEI) that permits to quantify and properly analyze this kind of mobility. The obtained evidence shows that, in general, immigrants experience a strong occupational downgrading in Spain when compared to their origin countries. This fact is due to the strong downgrading they experience when entering the Spanish labour market and their low improvement in the following years.
    Keywords: immigration, occupational mobility, Spain
    JEL: J15 J24 J61 J62
    Date: 2011–03
  9. By: Eric Guerci (Universite' de la Mediterranee, Marseille); Fulvio Fontini (University of Padova)
    Abstract: In this paper, we evaluate the impact of the proposed construction of new nuclear power (NP) plants on the cost of electricity in Italy. We create an agent‐based model that simulates actual Italian market generators’ behaviour in their bid offers at the Italian wholesale electricity market (IPEX), using the existing grid structure and power plant characteristics. We calculate the possible impact of the proposed installation of four nuclear power plants on zonal and average (National Single Price, PUN) electricity prices, taking into account the network grid (with its transmission constraints), the possible location of NP plants, the process of market splitting and the status of the generation side of the market, namely the capacity, production and marginal costs of generators. Both a cost‐ based scenario and a strategic scenario are considered. In the cost‐based scenario, we investigate how NP would shift the supply curve, which technology will be substituted hour by hour and zone by zone and whether the introduction of NP will reduce electricity prices. In the strategic scenario, we allow firms to strategically withhold some capacity through their bids in order to influence the system marginal price and evaluate how the introduction of nuclear base load power generation increases operators’ strategic space and impacts electricity prices.
    Keywords: Electricity market, PUN, Agent-based computational economics, Nuclear power.
    JEL: Q41 C63
    Date: 2011–03
  10. By: Nawazish Mirza (CREB - Centre for Research in Economics and Business - Lahore School of Economics - Lahore School of Economics); Herve Alexandre (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)
    Abstract: Banking firms exhibit unique business and financial dynamics that are priced in their stock returns. This paper compares traditional empirical asset pricing models on portfolio of banking firms from fourteen European countries and proposes a banking specific risk factor. We compared a single factor CAPM with three factors Fama and French model on exchange rate adjusted returns and found substantial support for firm specific factors of size and value. We propose that asset quality premium (proportion of non-performing loans to total advances and measured as BMG - bad minus good) constitutes an important asset pricing factor for banking stocks. The portfolios sorted on size, value and asset quality explained the maximum variation in returns depicting asset quality as a critical investment factor for banking stocks. These results have considerable implications for investment appraisals, cost of capital and risk management in financial stocks.
    Keywords: Banking Stocks, Asset Quality, Size Premiuim, Value Premium, factor model
    Date: 2010–07–07
  11. By: Vikström, Johan (Uppsala Center for Labor Studies); Rosholm, Michael (Department of Economics and Business, Aarhus University); Svarer, Michael (Department of Economics and Business, Aarhus University)
    Abstract: We re-analyze the effects of a Danish active labour market program social experiment, that included a range of sub-treatments, including monitoring, job search assistance and training. Previous studies have shown that the overall effect of the experiment is positive. We apply newly developed non-parametric methods to determine which of the individual policies that explains the positive effect. The use of non-parametric methods to separate sub-treatment effects is important from a methodological point of view, since the alternative, namely parametric/distributional assumptions, is in conflict with the concept of experimental evidence. Our results are highly relevant in a policy perspective, as optimal labour market policy design requires knowledge on the effectiveness of specific policy measures.
    Keywords: Active labour market policy; treatment effect; non-parametric bounds
    JEL: C14 C41 C93
    Date: 2011–03–13
  12. By: Christian Schmieder; Philipp Schmieder
    Abstract: This study investigates the link between bankruptcy and security legislation and potential credit losses faced by banks based on a cross-country study for the United States (US), the United Kingdom (UK) and Germany. Focusing on corporate credit, we find that legislation produces the highest credit risk in the US, followed by Germany, while UK law is found to be most favorable for banks. US banks gains from the higher number of informal restructurings (without losses) but lose from the low level of recovery in formal proceedings. German banks demand more credit risk mitigants than UK and US banks do, but still recover less than do UK banks. To be at par with UK banks, US banks would have to recover more than twice as much in formal proceedings, while German proceedings would have to be shortened by about one half.
    Keywords: Bankruptcy , Banks , Corporate sector , Credit risk , Cross country analysis , Economic models , Germany , Legislation , Loans , United Kingdom , United States ,
    Date: 2011–03–11
  13. By: Rita Asplund; Sami Napari
    Abstract: The paper compares the gender wage differentials of two occupation groups – innovation and non-innovation workers – separately for manufacturing and services using Finnish private-sector data. We apply a decomposition method based on unconditional quantile regression techniques to identify key factors underlying the gender wage gaps observed along the whole wage distribution, as well as changes in these wage gaps between 2002 and 2009. This more nuanced approach provides important new insights. We find conspicuous differences in average gender wage gaps, in gender wage-gap profiles across the wage distribution and also in the evolution of gender wage differentials over time between sectors and occupation groups. Our results imply that sector-specific factors are a more important driving force behind these differences in patterns and trends of gender wage gaps, although occupation-specific factors cannot be totally dismissed. Hence, comparisons of gender wage gaps, including their underlying sources, of innovation and non-innovation workers for too broadly defined segments of the labour market may result in misleading conclusions concerning the factual role of intangible capital.
    Keywords: gender wage gap, decomposition, human capital, intangible capital, quantile regression, wage formation, services, manufacturing
    Date: 2011–03–23
  14. By: Hallberg, Daniel (Uppsala Center for Labor Studies)
    Abstract: In Sweden, employers pay non-wage costs for their workforce in the form of legislated employment tax and collective fees. For parts of the workforce, the collective fees are progressive with respect to the employee’s age and wage. The objective of this paper is to examine how non-wage costs affect voluntary early retirement. To this end we use a large longitudinal employer–employee matched data set with administrative records of the private sector in Sweden. We exploit the variation in collective fee costs across companies to identify employer incentives to encourage early retirement. The results from the instrumental variable estimator suggest that a 1 percentage point increase in non-wage costs in relation to wage costs increases retirement by 6 percent. Further, given the wage sum and workforce structure, large firms spend more on non-wage compensation than small firms. The share of non-wage costs in relation to the wage sum is also positively linked to net employment growth.
    Keywords: Early retirement; non-wage labor costs; pensions; labor demand; collective fees
    JEL: J21 J23 J26 J32
    Date: 2011–03–18
  15. By: D. Engel; T. Mitze; R. Patuelli; J. Reinkowski
    Abstract: In this paper, we evaluate the R&D enhancing effects of two large public grant schemes aiming at encouraging the performance of firms organized in clusters. These are Germany's well known BioRegio and BioProfile contests for which we compare the research performance of winning regions in contrast with non-winning and non-participating comparison regions. We apply Difference-in-Difference estimation techniques in a generalized linear model framework, which allows to control for different initial regional conditions in the biotechnology related R&D activity. Our econometric findings support the view that winners generally outperform non-winning participants during the treatment period, thus indicating that exclusive funding as well as the stimulating effect of being a “winner" seems to work in the short-term. In contrast, no indirect impacts stemming from a potential mobilizing effect of the contest approaches have been detected. Also, we find only limited evidence for long-term effects of public R&D grants in the post-treatment period. The results of our analysis remain stable if we additionally augment the model to account for the particular role of spatial dependence in the R&D outcome variables.
    JEL: O38 R38 C23
    Date: 2011–03
  16. By: Kenneth Aarskaug Wiik and Lars Dommermuth (Statistics Norway)
    Abstract: Using data on individuals born 1946 to 1972 from the Norwegian Generations and Gender Survey (N = 7,587) we examine differentials in the number and incidence of co-residential relationships by gender and socioeconomic status. Regarding number of relationships, we found that women and younger respondents more often than men and older respondents reported having had two or more unions. 10% of the men and 5% of the women had no union experience by age 35. Controlling for relevant characteristics, our multivariate results showed that high income men experienced fewer unions than lower income men. Having a low income increased the odds of remaining single among men, whereas there was a positive association between tertiary education and remaining unpartnered among women.
    Keywords: Cohabitation; gender; GGS; marriage; Norway; relationship career; socioeconomic resources
    JEL: Z10 Z13 Z19
    Date: 2011–03
  17. By: Jaan Masso; Jaanika Meriküll; Priit Vahter
    Abstract: Systems of profit taxation are undergoing continuous change and are subject to numerous studies. This paper estimates the effect of the corporate tax reform in Estonia in the year 2000, a reform that was unique anywhere. This reform nullified the taxation of retained earnings and retained the corporate income tax only on distributed profits. We estimate the effect of the reform on firms’ capital structure, liquidity, investments and productivity. The effect of the reform is identified by comparing the performance of Estonian firms that were affected with that of firms from Latvia and Lithuania, the two other Baltic states, which are economically fairly similar to Estonia and have correlated business cycles. We use firm-level financial data and the difference in differences and propensity score matching methods for our analysis. The results show that the corporate tax reform has resulted in increased holdings of liquid assets and lower use of debt financing; these results can be seen especially among the smaller companies affected by the liquidity constraints. These developments have contributed positively to firms’ survival during the recent global economic crisis. A positive effect on investment and labour productivity has also been found, especially among companies in the services sector. The results imply that distributed profit taxation schemes may have significant positive effects on economic development and firms’ survival.
    Keywords: corporate income tax, capital structure, liquidity, investments, productivity, comparative economic development
    JEL: H25 H32 O16
    Date: 2011
  18. By: Bilal Barakat
    Abstract: Higher education is never free — the question is: who should pay for it? Current policy debates in Europe are increasingly focusing on raising the share of private funding. To date, policy discussions have centred on a relatively small number of alternatives, namely full public funding, tuition fees, either up-front or delayed and income-contingent, or a surtax on graduate incomes. Here, I present an alternative that, to my knowledge, has not been suggested previously, but sidesteps some important objections against other forms of private contributions. The basic idea explored here is to increase the statutory retirement age for higher education graduates relative to non-graduates. In principle, the resulting decrease in future public pension liabilities can be converted into increased funds for present spending on higher education. In this first discussion of the above proposal I consider important caveats, perform an order-of-magnitude estimate of financial feasibility, i.e. whether deferred graduate retirement (DGR) could potentially raise sufficient funds to replace tuition fees, and discuss advantages and disadvantages compared to more established policy options. I conclude that, at least in the European context, DGR is potentially feasible both financially and politically, has a number of desirable properties compared to the alternatives, and deserves more serious investigation.
    Keywords: Higher education, cost-sharing, retirement age.
    Date: 2011–03
  19. By: Grace Lordan (School of Economics, The University of Queensland); David Johnston (Centre for Health Economics, Monash University, Australia)
    Abstract: The attitudes of the general British population towards Muslims changed post 2001, and this change led to a significant increase in Anti-Muslim discrimination. We use this exogenous attitude change to estimate the causal impact of increased discrimination on a range of objective and subjective health outcomes. The difference-in-differences estimates indicate that discrimination worsens blood pressure, cholesterol, BMI, self-assessed general health, and some dimensions of mental health. Thus, discrimination is a potentially important determinant of the large racial and ethnic health gaps observed in many countries. We also investigate the pathways through which discrimination impacts upon health, and find that discrimination has a negative effect on employment, perceived social support, and health-producing behaviours. Crucially, our results hold for different control groups and model specifications.
    Date: 2011

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